Ecommerce Accounting Glossary

Average Order Value (AOV) measures the average amount customers spend per order. It’s a key ecommerce metric for tracking revenue performance.

Example: If total revenue is ₹50,000 from 2,000 orders, then AOV = ₹50,000 ÷ 2,000 = ₹25. This means the average customer spends ₹25 per order.
Formula: AOV = Total Revenue/Number of Orders

Average Selling Price (ASP) is the mean price at which a product or service is sold across all transactions during a specific period.
Formula: ASP = Total Revenue ÷ Total Units Sold

Example: A company sells 100 smartphones generating $50,000 in revenue. ASP = $50,000 ÷ 100 = $500 per smartphone. This metric helps track pricing trends and revenue performance.

Bad Debt is money owed to a business by a customer that is unlikely to be paid. It happens when customers fail to pay due to bankruptcy, financial trouble, or refusal.

Example: If a company sells goods worth $5,000 on credit and the customer goes bankrupt, that $5,000 is treated as bad debt expense, reducing profits.

Business-to-Business (B2B) refers to transactions, products, or services exchanged between two businesses, rather than between a business and individual consumers (B2C). B2B usually involves larger order values, longer sales cycles, and ongoing relationships, compared to B2C sales.

Example:A wholesaler selling raw materials to a manufacturer or a software company providing tools to an accounting firm.

Business-to-Consumer (B2C) refers to transactions where a business sells products or services directly to individual consumers for personal use. B2C usually involves smaller transactions, shorter sales cycles, and a focus on customer experience and marketing appeal compared to B2B.

Example: An online store selling clothes to shoppers or a restaurant serving meals to customers.

Buy Now Pay Later (BNPL) is a short-term financing option that lets consumers buy products immediately but pay later in installments, often interest-free. It makes purchases more affordable for consumers and can boost sales for businesses.

For example, a customer can purchase a $200 item, pay $50 upfront, and pay the rest in equal installments over weeks or months.

Buy One, Get One (BOGO) or Buy X, Get Y is a promotional sales strategy where customers receive an extra product (free or discounted) after purchasing a specific quantity. These promotions increase sales volume, clear inventory, attract customers, and encourage larger purchases while creating perceived value for consumers.

Example: Buy 2 shirts, get 1 free"" or ""buy 3 pizzas, get the 4th half-price.

Break-Even Analysis is a financial calculation that shows the point at which total revenue equals total costs, meaning the business makes no profit and no loss.

Example: If fixed costs are $10,000, selling price is $50 per unit, and variable costs are $30 per unit, the break-even point is 500 units ($10,000 ÷ $20).0–30)=500 units
The business must sell 500 units to break even.
Formula: Break-even Point (units) = Fixed Costs/Selling Price per Unit – Variable Cost per Unit

Budget is a detailed financial plan that outlines expected income and expenses over a specific period, helping businesses manage resources effectively. It includes revenue projections, cost estimates, and planned spending to guide decision-making.

Budgets typically cover fixed costs (like rent and salaries), variable costs (such as materials and utilities), one-time expenses, and cash flow forecasts. They help businesses control spending, evaluate performance, and plan for growth.

Bundles are marketing strategies where businesses combine multiple products or services into a single package sold at a discounted price compared to buying items separately.

Bundles can include complementary products, related services, or mixed offerings that enhance customer value. Companies use bundling to move slow-selling inventory, introduce new products, and encourage customers to try additional services they might not otherwise purchase.

For example, a business software company offers a ""Small Business Suite"" that bundles accounting software, payroll management, and inventory tracking for $150 monthly instead of $220 if purchased separately.

Buyer’s Persona is a detailed, fictional representation of an ideal customer based on market research and real data. It includes demographics, behaviors, goals, challenges, and motivations.

This helps businesses tailor marketing, messaging, and products to better meet customer needs and improve engagement by understanding who they are targeting and what drives their decisions.

CAC measures the cost to acquire one new customer. It includes all marketing and sales expenses divided by new customers gained.

Example: If $50,000 is spent on marketing and 500 customers are gained, CAC = $50,000 ÷ 500 = $100 per customer.
Formula: CAC = Total Sales & Marketing Costs ÷ New Customers Acquired

Capital Expenditure (CapEx) is money spent by a business to buy, upgrade, or maintain long-term assets like buildings, equipment, or land. These expenses benefit the company over many years and are recorded as assets, not immediate costs.

For example, buying a new machine for $10,000 used for 10 years is CapEx, depreciated annually. CapEx differs from daily operating expenses (OpEx) that cover short-term costs.

Capital Gain is the profit earned when you sell an asset (like stocks, property, or a business) for more than its purchase price.

Example: If you bought shares for $5,000 and later sold them for $7,500, your capital gain is $2,500.
Formula: Capital Gain = Selling Price – Purchase Price

Cash Accounting is an accounting method where income and expenses are recorded only when cash is actually received or paid. It's simpler than accrual accounting and often used by small businesses.

Example: If you issue an invoice in June but get paid in July, revenue is recorded in July (when cash is received), not June.

Cash Basis is an accounting method that records revenues and expenses only when cash is actually received or paid. It’s simple and common for small businesses, capturing income and costs based on cash flow timing rather than when transactions occur.

Example: If you bill a client in March but receive payment in April, the income is recognized in April under cash basis accounting.

Cash Equivalents are short-term, highly liquid investments that can be quickly converted into cash with minimal risk of losing value. They usually mature within three months or less.

They carry minimal risk of value change, making them almost as good as cash for business liquidity. Common examples include Treasury bills, money market funds, and short-term government bonds.

Cash Flow is the movement of money into and out of a business, showing how much cash is generated and used during a specific period. It reflects liquidity and a company’s ability to meet obligations, invest, or grow.

Positive cash flow means more money is coming in than going out, enabling the company to cover expenses, invest, and grow. Negative cash flow indicates more money is leaving than entering.

A Cash Flow Statement is a financial report that shows how cash moves in and out of a business during a specific period. It helps assess liquidity, solvency, and financial health.

It is divided into three sections:
Operating Activities – day-to-day business cash flow
Investing Activities – purchase/sale of assets or investments
Financing Activities – loans, equity, dividends

Campaign Tracking is monitoring the performance of marketing campaigns by tagging URLs to capture data on traffic sources, user actions, and conversions.

For example, a company launches a Facebook ad campaign for a new product. They use UTM parameters and analytics tools to track how many people clicked the ad, visited their website, and made purchases, measuring the campaign's effectiveness and return on investment.

Cart-Conversion Rate measures how many shoppers who add items to their cart actually complete the purchase.

Example: If 1,000 carts are created and 300 result in purchases, the cart-conversion rate = (300 ÷ 1,000) × 100 = 30%.
Formula: Cart Conversion Rate = (Number of completed purchases ÷ Number of carts created) × 100

Chargeback is the payment reversal initiated by the customer through their bank or credit card provider. It happens when a buyer disputes a transaction, such as for fraud, unauthorized use, product not received, or dissatisfaction.

Example: If a shopper claims they never received their $100 order and the bank sides with them, the seller must refund the $100, often incurring extra fees and penalties.
It protects customers but can be costly for merchants.

Chart of Accounts (COA) is a structured list of all financial accounts used by a business to record transactions in its general ledger. It categorizes accounts into assets, liabilities, equity, revenue, and expenses, helping track where money comes from and goes.

This organization aids bookkeeping, financial reporting, and decision-making by providing a clear financial overview.

A Content Management System (CMS) is software that enables users to create, manage, and publish digital content, like text, images, and videos, without needing coding skills. CMS platforms streamline website and app management, improving workflow, SEO, and multi-channel content delivery.

Example: WordPress, a popular CMS, lets businesses build and manage blogs, ecommerce stores, or corporate sites using templates and plugins, making it easy to update text, images, and pages.

Customer Lifetime Value (CLV) is the total revenue a business expects to generate from a single customer throughout their entire relationship. It helps companies determine how much to invest in acquiring and retaining customers.

Formula (basic): CLV=Average Purchase Value×Purchase Frequency×Customer Lifespan.
Example: If a customer spends $50 per order, buys 4 times a year, and stays for 5 years, CLV = 50 × 4 × 5 = $1,000.

Compliance refers to adhering to laws, regulations, standards, and internal policies that govern a business or organization. It ensures companies operate within legal boundaries and meet industry requirements.

For example, a financial company must comply with banking regulations like anti-money laundering laws, data protection requirements, and financial reporting standards.

Non-compliance can result in penalties, fines, legal action, or loss of business licenses.

Conversion Rate is the percentage of users who take a desired action, like making a purchase, signing up, or downloading, out of the total visitors. It measures how effectively a business converts interest into outcomes, helping optimize marketing and user experience.

Formula:  (Number of conversions ÷ Total visitors) × 100. 
Example: If 1,000 people visit an online store and 50 make a purchase, the conversion rate is 5%.

Contribution Margin is the amount of sales revenue remaining after deducting variable costs associated with producing a product or service. It represents the money available to cover fixed costs and generate profit. 
Formula: (Contribution Margin ÷ Sales Revenue) × 100

Example: If a product sells for $100 and variable costs are $60, the contribution margin = $40 (or 40%).

A Conversion Funnel is the step-by-step process that potential customers go through from first discovering a brand or product to completing a desired action, such as making a purchase. It visually represents the buyer’s journey, starting wide with many prospects at the top (awareness stage) and narrowing down to fewer customers at the bottom (conversion stage).

Example: An online store’s funnel might track users from clicking a Facebook ad → browsing products → adding to cart → checkout completion.

Cost of Goods Sold (COGS) is the total direct cost of producing or purchasing the products a business sells during a specific period. It includes expenses like raw materials, manufacturing, and shipping (but excludes overhead like marketing or rent).

Example: If a retailer starts with $50,000 in inventory, buys $20,000 more, and ends with $40,000, then COGS = 50,000 + 20,000 – 40,000 = $30,000.
Formula: COGS=Beginning Inventory+Purchases During Period−Ending Inventory

COGS Mapping is the process of identifying, categorizing, and tracking all direct costs that contribute to the Cost of Goods Sold. It involves systematically mapping how various expenses flow through production to determine the true cost of each product.

For example, a furniture manufacturer maps wood costs, worker wages, factory utilities, and packaging materials to each chair produced. This detailed cost tracking helps businesses accurately calculate product profitability, set appropriate pricing, identify cost reduction opportunities, and make informed decisions about product mix and resource allocation.

Cost-Per-Click (CPC) is an online advertising metric where advertisers pay a fee each time a user clicks on their ad. It is a performance-based pricing model commonly used in search engine and social media advertising.

Example: If a campaign spends $500 and gets 1,000 clicks, CPC = 500 ÷ 1,000 = $0.50 per click.
Formula: Total Ad Spend ÷ Number of Clicks.

Customer Relationship Management (CRM) is a set of practices, strategies, and technologies that companies use to manage and analyze customer interactions and data throughout the customer lifecycle.

A company using a CRM software can see a customer’s purchase history, emails, and support tickets in one place, allowing sales and support teams to offer personalized service and timely follow-ups.

Cross-Sell is a sales strategy where a business offers complementary or related products or services to customers based on their current or previous purchases. It increases average order value and enhances customer experience.

Example: When someone buys a laptop, the store suggests adding a mouse, laptop bag, or extended warranty. These related products are cross-sells that provide extra value while boosting revenue.

Current Liabilities are a company’s short-term financial obligations due to be settled within one year or within the normal operating cycle, whichever is longer. These debts typically include accounts payable, accrued expenses, short-term loans, wages payable, taxes owed, and the current portion of long-term debt.

Tracking current liabilities is essential for assessing a company’s liquidity and ability to meet imminent financial obligations.

Customer Journey is the complete path a customer takes from first discovering a brand to becoming a loyal buyer. It includes all touchpoints like browsing, inquiries, buying, and service, shaping the overall customer experience and satisfaction.

Example: A shopper sees an Instagram ad, browses the website, reads reviews, buys the product, receives follow-up emails, and later recommends it to a friend. This entire sequence is their customer journey.
Understanding the customer journey helps businesses identify pain points, optimize experiences, and create more effective marketing strategies at each stage.

Customer Retention Rate (CRR) is the percentage of existing customers a business retains over a specific period, reflecting how well it maintains ongoing customer relationships.

Example: If a company starts with 1,000 customers, gain 200 new ones, and end with 1,100 total customers, their retention rate is 90%.
Formula:  ((Customers at End - New Customers) / Customers at Start) × 100.

Click-Through Rate (CTR) is a metric that measures the percentage of users who click on a specific link, ad, or email out of the total number of people who viewed it. It reflects how effective the content is at driving engagement.

Example: If an ad is shown 10,000 times and gets 500 clicks, CTR = (500 ÷ 10,000) × 100 = 5%.
Formula:  (Number of Clicks ÷ Number of Impressions) × 100.

Data Backup is the process of creating copies of important files, databases, or entire systems to protect against data loss caused by accidents, hardware failure, cyberattacks, or disasters. Backups can be stored on external drives, cloud storage, or remote servers.

Data Security is the practice of protecting digital information from unauthorized access, theft, corruption, or loss throughout its entire lifecycle. It encompasses measures such as encryption, access controls, data masking, backups, and policies to safeguard data on hardware, software, and network systems.

Data Synchronization (Sync) is the process of keeping data consistent and up-to-date across multiple devices, platforms, or systems. It ensures that when information is updated in one location, the same changes are automatically reflected in all connected locations.

Example: In ecommerce, when a product’s stock level is updated in an inventory system, data sync ensures the same quantity is reflected instantly on sales channels like Amazon, Shopify, and the accounting software, preventing overselling or mismatched records.

Demand Forecasting is a business process used to estimate the future demand for a product or service based on historical sales data, market trends, and other relevant factors. It helps companies plan production, manage inventory, allocate resources, and make strategic decisions. Accurate demand forecasting improves profitability by avoiding overproduction and stock shortages.

Deferred Expenses (also called prepaid expenses) are costs a business pays in advance for goods or services it will use in the future. Instead of recording them fully as expenses right away, they are first recorded as assets and then gradually expensed over time as the benefit is consumed.

Example: If a company pays $12,000 for a one-year insurance policy, it records it as a deferred expense and expenses $1,000 each month.

Deferred Revenue (also called unearned revenue) is income a business receives in advance for goods or services it has not yet delivered. It is recorded as a liability until the product or service is provided, at which point it becomes actual revenue.

Example: If a business collects $24,000 for a 12-month service, it records it as deferred revenue and recognizes $2,000 as revenue each month.

Depreciation is the systematic reduction of the recorded cost of a tangible fixed asset over its useful life. It reflects wear and tear, aging, or usage of assets like machinery, vehicles, or buildings, and spreads their expense across multiple accounting periods.

For example, a company buys a delivery truck for $60,000 with a 5-year useful life. Using straight-line depreciation, they expense $12,000 annually instead of the full cost upfront. This spreads the cost over the asset's productive years, providing a more accurate picture of expenses and profits each year.

Deposit Reconciliation is the process of verifying that deposits recorded in a company's accounting records match the deposits shown on bank statements. It ensures accuracy between internal records and bank records.

For example, a retail store records a $5,000 daily deposit in their books, but the bank statement shows $4,950 due to bank fees. The reconciliation identifies this $50 difference, allowing the company to adjust their records and account for the bank charges properly.

Digital Wallets are electronic applications that securely store payment information (like credit/debit cards, bank accounts, or loyalty cards) and allow users to make online or contactless payments quickly. They often use encryption and authentication for security.

Example: A shopper in a store can tap their phone at checkout using Apple Pay instead of swiping a physical card. Similarly, PayPal can be used to pay instantly for an online order.

Dimensional Weight (DIM Weight) is a shipping pricing method based on a package’s size rather than its actual weight. It ensures bulky but lightweight packages are charged fairly for the space they take up.
Formula:  (Length × Width × Height) ÷ Divisor. 

Example: A box measuring 20×15×10 inches = 3,000 cubic inches. If the DIM factor is 139, DIM Weight = 3,000 ÷ 139 ≈ 22 lbs. If actual weight is 10 lbs, the carrier charges for 22 lbs.

A discount code is an alphanumeric code customers apply at checkout to get a price reduction or special offer on their purchase. Types include percentage discounts, fixed amount discounts, free shipping, and buy-one-get-one offers.

Example: An online store shares the code SAVE15 during a holiday sale. When entered at checkout, it gives customers 15% off their total purchase.

DTC (Direct-to-Consumer) is a business model where brands sell their products directly to customers, bypassing intermediaries like wholesalers, distributors, or retailers. It allows businesses to control pricing, branding, and customer relationships while often offering better margins.

Dynamic Pricing is a strategy where product prices are adjusted in real time based on factors like demand, competition, seasonality, or customer behavior. Prices fluctuate to maximize revenue, promote sales during low-demand periods, or optimize profits during peak demand. 

Example: An online retailer increases the price of a popular gadget when demand spikes but lowers it later to attract price-sensitive buyers.

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a financial metric used to measure a company's core profitability by excluding non-operating expenses like interest, taxes, and non-cash expenses such as depreciation and amortization.

Example: If a company has $500,000 net income, plus $50,000 interest, $100,000 taxes, $80,000 depreciation, and $20,000 amortization, then EBITDA = $750,000.
Formula: EBITDA = Net Income + Interest + Taxes + Depreciation +Amortization

Earnings Before Interest and Tax (EBIT), also called Operating Profit, is a financial metric that measures a company’s profitability from its core operations, excluding financing costs (interest) and taxes. It shows how efficiently the business generates profit from sales after covering operating expenses.

Example: If a company earns $1,000,000 in revenue and has $700,000 in operating expenses, EBIT = 1,000,000 – 700,000 = $300,000.
Formula: EBIT= Revenue−Operating Expenses (excluding interest and tax)

Earnings Before Tax (EBT) is a financial metric that shows a company’s profitability after accounting for all expenses except income taxes. It reflects how much profit a business generates before tax obligations.

Example: If a company has $1,000,000 revenue, $600,000 operating expenses, and $50,000 interest, then EBT = 1,000,000 – 600,000 – 50,000 = $350,000.
Formula: EBT=Net Income+Taxes

Earnings Per Share (EPS) is a financial metric that measures how much profit a company generated per outstanding share of stock. It indicates the company's profitability on a per-share basis and is widely used by investors to evaluate performance.

Example: If a company earns $2,000,000 in net income, pays $200,000 in preferred dividends, and has 900,000 shares outstanding,
EPS = (2,000,000 – 200,000) ÷ 900,000 = $2.00 per share.
Formula: Net Income - Preferred Dividendsc÷ Outstanding Shares

End of Financial Year (EOFY) is the conclusion of a company's 12-month accounting period, when businesses close their books and prepare annual financial statements. At EOFY, businesses finalize and close their books, prepare financial statements, reconcile accounts, and calculate taxes owed or refunds due.

The timing varies by country and company preference. For example, in Australia, EOFY is June 30th for most businesses, while in the US, many companies use December 31st or other dates.

Enterprise Resource Planning (ERP) is a type of software that integrates and manages core business processes, such as finance, inventory, supply chain, sales, HR, and manufacturing, into a single centralized system.
ERP centralizes data into one shared system, providing a unified view of operations to improve efficiency, decision-making, and collaboration.

For example, when a customer places an order in an ERP system, it automatically updates inventory levels, generates invoices in accounting, triggers production schedules in manufacturing, and notifies the shipping department.

Expense Tracking is the process of monitoring and recording business or personal expenditures to ensure spending stays within budget and aligns with financial goals.

It helps organizations understand where money goes, manage budgets, prepare for taxes, prevent fraud, and make informed financial decisions.

Fixed Assets are long-term tangible resources a business owns and uses to generate income, not intended for sale within 12 months. Examples include buildings, machinery, and vehicles.

Example: A company buys equipment for $100,000 with 10-year useful life.
Annual depreciation = $100,000 ÷ 10 = $10,000
Book value after 3 years = $100,000 - ($10,000 × 3) = $70,000
Formula: Net Fixed Assets = Gross Fixed Assets - Accumulated Depreciation

Fixed Costs are business expenses that do not change with production or sales volume. They remain constant over a period, regardless of how much a company produces or sells.

These costs must be paid even if no goods or services are produced. Examples include rent, salaries, insurance, and lease payments.

Financial Forecasting is the process of estimating a company’s future financial performance using historical data, current trends, and assumptions about future conditions. It helps businesses plan for revenue, expenses, cash flow, and growth.

This process helps businesses make informed decisions about budgeting, resource allocation, and strategic planning.

Financial Reporting is the process of preparing and presenting financial statements that communicate a company's financial performance and position to stakeholders (investors, creditors, regulators).

These reports provide a formal record of the financial activities and performance of a company over a specific period, typically a quarter or a year.

Fulfillment is the end-to-end process of receiving, processing, and delivering customer orders. It includes storing inventory, picking and packing products, shipping, and handling returns.

Example: An online store receives an order for shoes, the fulfillment team (or 3PL partner) picks the shoes from inventory, packs them, and ships them to the customer.

General Ledger (GL) is a comprehensive record of a company's financial transactions, organized by accounts such as assets, liabilities, equity, revenue, and expenses. It uses a double-entry system where every debit has a corresponding credit. It serves as the foundation for financial reporting.

Example: If a business buys office supplies for $500, the GL records it as an expense (debit) and reduces cash (credit).

General Ledger Mapping is the process of assigning transactions from various systems to correct general ledger accounts for accurate financial reporting.  It acts as a translation layer, ensuring that financial data from different systems, departments, or even different companies can be accurately consolidated and understood in a unified chart of accounts.

Example: Online sales revenue from Shopify is mapped to the “Sales Revenue” GL account, while payment processing fees are mapped to “Bank Fees Expense.”

Ghost Commerce is an ecommerce business model where sellers don’t create or stock their own products. Instead, they promote and sell existing products, often through affiliate marketing, dropshipping, or white-label arrangements, while another company handles production, inventory, and shipping.

Example: An entrepreneur builds a niche online store showcasing fitness gear, but all products are supplied and shipped by a third-party vendor. The seller earns profit from each sale without ever holding inventory.

Granular (Order-Level) Posting is an accounting method where every individual sales order is recorded as a separate and detailed entry in the company's general ledger. Instead of grouping sales into a single, summarized daily or weekly batch, this approach captures the unique financial data for each transaction.

Example: Instead of posting a single daily sales total of $10,000, the system records each order (e.g., Order #101: $200 revenue, $20 shipping, $5 fee).

Gross Margin is a key profitability metric that shows how much profit a company makes from selling its products or services, after subtracting the direct costs associated with producing them.

Example: If revenue is $100,000 and COGS is $60,000, gross margin = 40%.
Formula: Gross Margin = (Revenue - COGS) ÷ Revenue × 100

Gross Merchandise Value (GMV) is the total sales dollar value of all goods sold through an e-commerce platform or marketplace over a specific time period, before deducting any fees, expenses, discounts, or returns.

Example: If 1,000 products are sold at $50 each, GMV = $50,000.
Formula: GMV = Number of Transactions × Average Transaction Value

Hybrid Selling is a sales approach that combines multiple channels, such as online (ecommerce, marketplaces, B2B portals) and offline (retail stores, distributors, trade shows, or inside sales), to reach customers and close deals.

This strategy enhances personalized customer experiences and adapts to changing buyer behaviors, especially in B2B sales where blending remote and human touchpoints drives better outcomes.

Hybrid Posting (also called Flexible Posting) is an accounting method that lets businesses choose between order-level posting and summary-level posting depending on their needs. It combines the detail of granular posting with the efficiency of summary posting.

Example: A business might post high-value orders individually for accuracy, while posting smaller daily sales in summary to reduce ledger clutter.

Impression, in the context of digital marketing and advertising, is the metric that counts how many times an ad, post, or piece of content is displayed on a screen, regardless of whether the viewer engages with it.

Example: If a Facebook ad appears on 1,000 users’ feeds, that’s 1,000 impressions, even if no one clicks it.

Impairment, in the accounting context, is the reduction in the value of a company's asset to below its carrying value on the balance sheet.

Example: A company owns machinery recorded at $100,000, but due to damage its fair value is now $70,000. The firm records an impairment loss of $30,000.

Incoterms (International Commercial Terms) are standardized trade terms defining buyer and seller responsibilities for shipping, insurance, and risk transfer in international transactions.

They are published by the International Chamber of Commerce (ICC) and are periodically updated, with the most recent version being Incoterms 2020.

Inventory refers to the goods, raw materials, and products that a business holds for sale or use in production. It includes raw materials, work-in-progress (partially finished goods), and finished goods ready for sale.

Example: A clothing retailer’s inventory may include fabric (raw material), half-stitched shirts (WIP), and ready-to-sell jeans (finished goods).

Inventory Management is the process of overseeing ordering, storing, and tracking inventory to optimize costs while ensuring product availability. It ensures the right products are available, in the right quantity, at the right time.

Example: An ecommerce store uses automation tool to monitor stock levels, automatically reorder items when they’re low, and sync inventory across warehouses and sales channels.

The Inventory Turnover Ratio measures how many times a company sells and replaces its inventory during a given period. It shows how efficiently inventory is managed.

Example: If COGS = $500,000 and average inventory = $100,000, turnover ratio = 5. This means the company sold and replenished its inventory 5 times in that period.
Formula: Inventory Turnover = Cost of Goods Sold ÷ Average Inventory

Inventory Sync is the automatic updating of stock levels across multiple sales channels, warehouses, and systems in real-time or near real-time. It prevents overselling, stockouts, and discrepancies by ensuring every platform reflects the same inventory data.

Example: If a seller has 100 units of a product and sells 5 on Amazon, inventory sync instantly updates the count to 95 on Shopify, eBay, and the accounting system.

Invoice is a commercial document issued by a seller to a buyer, requesting payment for goods or services that have been provided. It serves as a formal record of a sale and details the specifics of the transaction.

Basically, an invoice is a bill, which tells the customer what they bought, how much they owe, and how and when they need to pay.

Just-in-Time (JIT) inventory is a strategy where materials are ordered and received only when needed in the production process. This minimizes inventory holding costs and waste.

Example: If a store sells 100 units/week and delivery takes 1 week, it orders exactly 100 units as soon as stock hits zero, no extra inventory is stored.

A Journal Entry is the formal record of a financial transaction in accounting. It follows the double-entry system, meaning every entry has equal debits and credits to keep the books balanced.

The fundamental rule is that the total amount of the debits must equal the total amount of the credits for any given transaction. For example, selling a product for $100 cash would debit Cash and credit Sales Revenue by $100 each. 

A Journal Audit is the process of examining a company's journal entries to ensure they are accurate, properly documented, and compliant with accounting standards. It's a critical part of both internal and external audits.

KPI is a measurable value that demonstrates how effectively a company is achieving its key business objectives. It helps track progress toward goals and identify areas needing improvement.

Example: Conversion rate is one of the KPIs, which is used to measure the percentage of website visitors who make a purchase.
Formula: Conversion Rate = (Number of Sales ÷ Total Website Visitors) × 100%

A Point of Sale (POS) is the location and system where a retail transaction is completed, processing payments and recording sales. It includes hardware and software to scan items, calculate totals, accept payments, and update inventory. Examples include Square and Lightspeed.

PPC (Pay-Per-Click) is a digital advertising model where a business pays a fee each time one of its ads is clicked. Instead of earning visits organically, it's a method of buying traffic to your website, commonly used on platforms like Google Ads and Facebook.

Example: A shoe retailer bids on the keyword ""running shoes,"" and their ad appears on Google. They pay the bid amount only when a user clicks that ad.
Formula: Cost-Per-Click (CPC) = Total Ad Cost / Number of Clicks
Total PPC Cost = Cost Per Click (CPC) × Number of Clicks

Print on Demand (POD) is an e-commerce model where you sell custom-printed products (like t-shirts or mugs) that are only produced after an order is placed. This eliminates the need for inventory, as a third-party supplier handles printing and shipping directly to the customer. Examples of POD services include Printful and Redbubble.

Product Bundles are multiple individual products sold together as one combined package, often at a discounted price to encourage higher sales and average order value.

Example: A beach kit selling sunscreen, towels, and flip flops as one bundle.

A Profit & Loss (P&L) statement is a financial report summarizing a company's revenues, expenses, and profits/losses over a specific period (e.g., month, quarter). It provides a clear snapshot of a business's financial performance and profitability.
Formula: Net Profit (or Loss) = Total Revenue – Total Expenses.

Profit Margin measures how much profit a business makes as a percentage of revenue. It indicates how efficiently a company makes money from its sales. A higher percentage means the company is more profitable.

Example: If a product sells for $100 with $70 costs, margin is 30%.
Formula: Profit Margin (%) = (Net Profit ÷ Revenue) × 100.

Purchase Order (PO) is a formal document a buyer issues to a supplier, specifying products, quantities, and agreed prices before purchase. It serves as a legal contract and record.